China Expected to be Next Destination for Self-storage Growth
June 29, 2015, Beijing - CBRE recently announced its latest research entitled Asia Self-storage: Demographic Changes Drive Demand for Self-storage Space in Asia. Focusing on the self-storage development in major Asian markets, the report revealed that whilst already mature and developed in the US, UK and Australia, the self-storage industry is rapidly expanding in Asia, fulfilling market demand for more storage space. In response, investors are being increasingly drawn into this alternative asset class within this region. According to CBRE’s APAC investor intentions survey conducted in January 2015, 7% of investors surveyed had already invested in self-storage, with an additional 9% interested in the sector.
According to the report, consumer demand is strong, due to a range of drivers such as disruptive life events, urbanization and changes in business activity, with cities such as Tokyo, Hong Kong and Singapore leading the trend. The four ‘Ds’ - death, divorce, downsizing and dislocation (job change, marriage, college or natural disaster) - as well as business activity (expansions and contractions) are considered the key drivers of self-storage demand in Asia.
Mainland China is set to be one of the next destinations for self-storage. Especially first-tier metropolitan cities with large population, such as Beijing, Shanghai, Guangzhou and Shenzhen are expected to be some of the key emerging markets for self-storage. These cities are experiencing similar demand drivers – tighter living spaces due to rapid urbanization; strong job growth and other dislocation events; and a growing office market – as more developed Asian cities.
Louisa Luo, Director of Industrial and Logistics Services, CBRE China, commented: “In high consumption areas such as Beijing, Shanghai, Guangzhou and Shenzhen, residents are more inclined to sell their belongings when they change jobs or get divorced. As a result, online exchange market is quite active. This inclination will have an effect on the self-storage market growth in these cities. In addition, although China is the most talked about developing market, locating and securing the right type of property still presents challenges as industrial zones are located far outside the major population centers. The most likely entry method would be the conversion of older office buildings, similar to the process in Japan.”
The outlook for the self-storage sector in Asia is positive - especially in Hong Kong, Singapore and Tokyo. Due to low saturation, as measured by self-storage per household, the self-storage market is set for expansion in these markets. CBRE’s study shows that all three markets have a shortfall in self-storage space. This is apparent when comparing Asia self-storage per household - 1.3 sq. ft. in Singapore; 1.1 sq. ft. in Hong Kong; and 0.32 sq. ft. in Tokyo - with more developed markets such as the US, where they have 21.62 sq. ft. per household. Whilst CBRE believes it is highly unlikely Asian markets will reach the same level of penetration as the US due to factors such as population growth, growth in demand is still apparent.
Frank Chen, Executive Director, Head of CBRE Research, CBRE China, commented: “ven though there are significant opportunities for the growth of the self-storage industry in Asia, we should be aware of three key risks for this sector: the overall awareness of self-storage; the scarcity of suitably located and priced properties; and the short lease terms and land tenure in Asia. We believe that focus in the future will also be a consolidation of players to create scale in multiple markets.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.